Do you know a parent or senior close to you who has been labeled a credit risk? Repairing a bad credit score is no quick task. Because it involves an objective look at what can be painful financial choices, it’s often avoided (therefore compounding the problem). The good news is that, with time and patience, you can help your loved one repair bad credit and start building a healthier borrowing history.
First, it’s essential to know the hallmarks of credit repair scam artists who could already be trying to contact your loved one. These sham organizations prey upon trusting seniors unaware of their legal rights. Here are three warning signs to look for:
- Their company wants your loved one to pay in advance for their services. That’s illegal under federal law. All credit assistance companies must wait for payment until all contracted work is complete.
- They encourage Dad to form a new “credit identity.” Some scammers will encourage applicants to apply for an Employer Identification Number to replace their SSN on a new credit report application. This, too, is illegal.
- The company promises to remove negative info on your loved one’s credit report, even if it’s accurate. If the information on any credit report is legitimate, no one can get it removed.
The Credit Repair Organization Act requires companies to provide a written contract explaining in advance your legal rights and the services they’ll perform, how long it will take to get results, the total cost of their services, your three-day right to cancel at no charge, as well as any guarantees. If you or your loved one suspects attempted fraud, you can report to your local consumer affairs office, state Attorney General, or file an online complaint with the Federal Trade Commission.
While hiring a legitimate credit repair agency is undoubtedly an option, the steps to repairing bad credit are straightforward ones that you and your loved ones can tackle together. Here are three important tasks to get you started:
Request Credit Reports and Review Thoroughly
Nationwide credit reporting companies are required to provide a free copy of your credit report once a year upon request. Review for errors line by line, with an eye for the slightest discrepancy. Even a wrong address or misspelled name, when corrected, could improve one’s credit score. Head to the Federal Trade Commission website for more important information on credit reports.
Stick to a Payment Schedule
Paying bills on time is one of the most critical factors in credit scoring, so getting payment schedules in order right away is important. First, make a list of all creditors, cross-checking with bank statements for accuracy. Next, enroll in automatic payment plans to establish a timely payment pattern wherever possible. If you’re concerned about your loved one’s ability to manage on his own, consider being named an authorized signer on their checking account to take care of any accounts that need to be paid manually. However, be wary of becoming a co-signer, as you could become financially liable for any unresolved debt.
Reduce the Amount Owed
While there are no quick fixes here, you may be able to make incremental improvements to the overall balance. Review your loved one’s credit cards thoroughly and look for any 0% balance transfer offers. If there are none, shop around, or talk to their credit card companies, you may be able to negotiate a lower interest rate.